Concerned about the skirmish in the Korean peninsula and the Federal Reserve's darker view about the economy, investors sold off stocks Tuesday, sending major indexes off at least 1.3% and reigniting worries about the pace and strength of the economic recovery. Fears that Ireland's debt woes could spread beyond the country's borders also played a part in the market's slide yesterday.
The Dow average plunged more than 142 points, or 1.3%, for its fourth drop in the past six sessions as downbeat news on the economy and reports that North Korea had fired artillery shells on a South Korean island, killing two South Korean soldiers, had investors dumping equities.
The technology-laden Nasdaq Composite index dropped 1.5% to 2494.95 and the broader S&P's 500-stock index fell 1.4% to 1180.73. On the New York Stock Exchange, declining issues beat those that rose in price by a four-to-one margin. The CBOE Vix, the market's measure of volatility, shot up 14% to 21.
The greenback advanced 1.3% against a basket of six other currencies. A stronger dollar weighed on shares of energy companies, sending Chevron CVX and ExxonMobil off XOM at least 2%. The flight to safety sent Treasury prices higher. The yield on the benchmark 10-year note fell to 2.78% from 2.80% late Monday. Gold prices advanced 1.5% to $1377.60.
The Federal Reserve, meanwhile, slashed its economic growth forecast for 2010 to 2.4% to 2.5%, down sharply from its earlier view of 3% to 3.5%. For 2011, the economy is expected to grow in the range of 3% to 3.6%.
This morning's stock futures suggest a modestly higher opening as investors parse a raft of economic readings for signs of strength in the domestic economy. Ahead of the opening bell, the Dow Jones industrial average futures rose 28 points, or 0.25%, to 11,042. S&P 500 futures rose 3.7 points, or 0.31%, to 1,182. Nasdaq 100 futures gained 4.75 points, or 0.22%, to 2,123.
Yesterday, losses were broad based, with twenty-nine of the thirty components that make up the Dow closing in the red. Hewlett-Packard HPQ was the only gainer, up 2.2%, to $44.19, after the company reported better-than-expected results and came out with a better-than-expected outlook. However, fellow blue-chips failed to take the lead and dropped with the broader market. Microsoft MSFT fell 2.4%, JP Morgan JPM and Disney DIS dropped 2.3% and Merck MRK fell 2.2%.
All ten S&P500 industry sectors dropped at least 1% on the day. Oil and gas and basic material sector shares fell 1.9%, financials 1.5%, tech 1.4%, industrials and health care 1.3%, consumer goods and consumer services 1.2%, with telecommunications and utility sector shares down 1.0%.
Weakness in technology issues sent NASDAQ components Cisco CSCO off 1.8%, Brocade Communications BRCM down 10%, and Intel INTC off 0.8%.
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